Royalty payment to NRI

You do not need a stamp paper agreement. Just a writing even on letter head and confirmed by other party is good enough as it is an international contract. You can use international arbitrations clauses in the agreement.

For income tax act, the stamped agreement of royalty is not necessary. Royalty payment is like a payment against a purchase order or a letter of intent. It is necessary for you to stamp a document according to the law of the state where you are resident in only if you need to use it for taking action in a court of law of appropriate jurisdiction in that state itself. Normally in cross border contracts, they always word it in formats giving by the international chamber of commerce. You will obviously have some written communication for a royalty payment. Even a letter from him indicating amount of royalty is sufficent and if you wish you can make a document now according to ICC formats and refer to that letter in the document. This is as good as evidence of agreement for purposes of income tax act and even RBI for payments of royalty. However, if you need to take legal action later for a non performance, you must have a valid document in the appropriate jurisdiction that needs to be properly stamped as perlaw of the appropriate jurisdiction. You can make it now also by adding clauses referring to previous communications.

Thank you Mr. sunil. You have clear me a lot. but my exact query as follows:

Mr. A and Mr. B enter into an agreement to jointly publish a book. In their agreement both A and B agree to pay 50% : 50% royalty to C and D the author (USA Resident). A and B does not made any seperate agreement with Mr. C and Mr. D for payment of Royalty. The fact is just mentioned in the agrement of A and B only. Now I have to issue Form 15CB to deduction of Tax. please advice me that in the absence of agreement between A & B and C & D can I issue form 15CB?

Because section 115A(1)b state that royalty should be paid in persuance of an agreement.

Please guide.

As I said, you get your parties to make an agreement on plain paper now also (if money is going from India to abroad). In this agreement, refer to the previous writings and other agreements as the basis for the payment of royalty between your client and the recepient of the royalty payment. take a format from International chamber of commercefor the arbitration clauses. That is enough as an agreement. Even if there is a letter from the recepient indicating that there is a royalty payment on which your client signs and accepts, the letter is deemed to be an agreement. As you want to be safe, you make the agreement and refer to other agreements and communications and annex them to the agreement. You would not use a stamp paper as there is no jurisdiction of any courts in a particular state although usually the recepient normally indicates jurisdiction of appropriate courts in his country. Therefore you do not need Indian stamp paper as finally you are not going to sue them in your jurisdiction and they are not going to approach an Indian court for any non payment. You only need an agreement as a written evidence for genuinty of transaction. As a CA issuing Form 15CB, you get proper details of recepients Bank Account and ensure that your client fills in proper Bank Information where payment has to go and indeed it is in the name of the recepient as per agreement. For your safety, ask client to get a demand draft issued in that name and keep a xerox or copy of SWIFT mentioning nameof Beneficiary as per what your client submits to you.. Basically your duty is for the rate of tax (as per IT Act or DTAA, whichever more beneficial to assessee). Assessee has to submit this 15CB to bank alongwith his 15CA duly verified. It is Banks responsibility to ensure that AMLA procedures are complied and money is delivered to correct person and correct account. The reason there has to be an agreement is because RBI and IT want to be damn sure that it is not a sham transaction for money laundering. Therefore, for your saftey keep xeroxes of details of books on which royalty is paid and some documentation. These details are basis on which you certify that payment is on account of royalty at a particular rate of tax. They have given this resposnibility to CA to make checks that there is really some book or some materials forwhich a royalty is paid and it is not a sham transaction. therefore with agreement, please also have documents evidencing what royalty has to be paid for. It can even be from a reputed publisher confirming receipt or delivery of the scriptt of the book etc. See whatever you can get. These are all part of the agreements.

Mr Sunil I am highly thankfull for sparaing time and guiding me in such a eloberate manner.

Thank you very much. 

Thanks for recognising my response. To sum up, as the money has not yet left India, agreement can be made any time before remitting the money. What responsibility is really fixed on you is the integrity of your client and his transaction. In addition to loss of revenue, what the GOI definitely does NOT WANT is a sham fronting transaction that would send money outside through legitimate channels to fund terror operation in India or any other heinous crimes against India. I am not saying anything is wrong with your client, but please do not issue a form 15CB to someone you do not know at all.

My mother wishes to gift her flat in Indore to me. I am an NRI and have never paid any taxes in India ever before nor have any income from there. If in fact my mother gifts this flat to me, what sort of tax implications would I have -if any?? Do I have to pay any gift tax ? if so w hat % of value and who is this to be paid to? Let me clarify, this is a brand new flat for which the possesion is yet to be taken in next few motnhs and then regitartion done. I am very confused. Pls. help clarify to gucciraja @ yahoo.com

Kamini Chopra

Kamini Chopra In my opinion by accepting the gift in the shape of flat you do not require to pay anything to any body. The gift from relative is exempt in india. All you have to pay is the registration charge to the registrar at local level to get the flat trandfered in you name. further in some state if property is registered in the name of lady the registration charges are lower thatn normal. so ckeck out this.